Texas Register, Volume 38, Number 47, Pages 8313-8478, November 22, 2013 Page: 8,365
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ment company. While it is not feasible to determine the actual
cost of such employees for all captive insurance companies, the
United States Department of Labor, Bureau of Labor Statistics'
May 2012, Occupational Employment Statistics indicates that
the average hourly wage in Texas is $52.58 for actuaries. It is
not feasible to estimate the cost of contracting for each service
for all captive insurance companies. The method of compliance,
and ultimate cost of compliance, is a business decision of the
insurance company and not a requirement of this proposal.
Section 6.301(8) also requires the captive insurance company to
notify the department of any change to the information provided
in the application. The notice may be transmitted electronically
at minimal cost or by mail at a cost estimated to be less than $5
in aggregate for postage, envelope, paper, and mail preparation.
The information related to the change in the plan of operation
should be readily available to the captive insurance company
applicant and not result in an additional cost.
The proposal requires the captive insurance company to notify
the department of material changes to its plan of operation, no-
tify the department of changes to the information provided in
the captive insurance company's application, maintain its books
and records, and contract with captive management companies
that will maintain the captive management company's books and
records.
Insurance Code 964.055(b)(3) requires captive insurance com-
panies to request the commissioner's authority to maintain the
captive insurance company's books at a location outside of the
state. The department considers the word "maintain" to include
the preparation of the records. The requirement in 6.306(a) - (c)
for the captive insurance company to obtain the commissioner's
permission to maintain records outside of Texas does not result
in an additional cost to the captive insurance company. The con-
tent of the required notice should be readily available to the cap-
tive insurance company applicant and not result in an additional
cost. The captive insurance company may transmit the notice
electronically at minimal cost or by mail at a cost estimated to
be less than $5 in aggregate for postage, envelope, paper, and
mail preparation.
Section 6.306(d) - (g) establish the condition of the books and
records to enable the department to examine the captive in-
surance company, particularly for electronic records. Insurance
Code 964.002(a)(3) provides that Insurance Code Chapter 401
applies to captive insurance companies. Insurance Code Chap-
ter 401, Subchapter B establishes an examination requirement.
The application of the examination provision to captive insur-
ance companies is also referenced in Insurance Code 964.065.
The department expects that any insurer would maintain at least
these limited record-keeping standards as a matter of good busi-
nesses practices; however, that may not always be the situation.
Each captive insurance company using electronic record keep-
ing must develop and maintain a system under which the insurer
maintains its records. This will require hardware and software.
Section 6.306 requires the records to then have an audit trail,
be accessible in Texas, and be recoverable. Each captive insur-
ance company's actual costs will depend on the captive insur-
ance company's existing record keeping system, location, trans-
mission requirements, and existing staff. To analyze the captive
insurance company's current systems and develop the neces-
sary features to comply with the proposal, the insurer may need
the services of systems software engineers for computer appli-
cations and software development, computer programmers, and
accountants.While it is not feasible to determine the actual cost of em-
ployees for all insurers, the United States Department of
Labor, Bureau of Labor Statistics' May 2012, Occupational
Employment Statistics indicates that the average hourly wages
for these professions in Texas are: $47.80 for software en-
gineers, (http://www.bls.gov/oes/current/oesl 51133. htm#st);
$37.78 for computer programmers (http://www.bls.gov/oes/cur-
rent/oes151131.htm#st); and $34.54 for accountants and
auditors. It is not feasible to estimate the cost of contracting for
each service for all captive insurance companies. The method
of compliance, and ultimate cost of compliance, is a business
decision of the insurance company and not a requirement of
this proposal.
Insurance Code 964.056(c)(2) authorizes a captive insurance
company to report as an asset a letter of credit in a form that
has been approved by the commissioner and issued by a bank
that has been approved by the commissioner. Section 6.409(a)
establishes requirements for an acceptable letter of credit and is-
suing bank. Obtaining an acceptable letter of credit may require
the services of accountants and lawyers. It is a business deci-
sion of the captive insurance company to hire staff or contract
for services through a captive management company. While it
is not feasible to determine the actual cost of employees for all
captive insurance companies, the United States Department of
Labor, Bureau of Labor Statistics' May 2012, Occupational Em-
ployment Statistics indicates that the average hourly wages for
these professions in Texas are $34.54 for accountants and audi-
tors and $62.27 for lawyers. It is not feasible to estimate the cost
of contracting for each service for all captive insurance compa-
nies. The method of compliance, and ultimate cost of compli-
ance, is a business decision of the insurance company and not
a requirement of this proposal.
Insurance Code 964.052(d) authorizes a "credit for reserves on
risks or portions of risks ceded to reinsurers under Subchapter
C, [Insurance Code] Chapter 492, and Subchapter C, [Insurance
Code] Chapter 493." Those subchapters and the regulations im-
plementing them reference acceptable letters of credit for rein-
surance purposes. Section 6.409(b) restates the statutory re-
quirement and refers users to applicable regulations. The re-
quirement in Insurance Code 964.052(d) and the adopted rules
implementing Insurance Code Chapter 492, Subchapter C, and
Insurance Code Chapter 493, Subchapter C are not a cost aris-
ing from the adoption or enforcement of the proposal.
Insurance Code 964.002(c) provides that Insurance Code
"Chapter 823 applies to a captive insurance company only if
the company is affiliated with another insurer that is subject
to Chapter 823." Section 6.410 restates that requirement and
refers users to applicable regulations. The requirement stated
in Insurance Code 964.002(c) and the adopted rules imple-
menting that chapter are not a cost arising from the adoption or
enforcement of the proposal.
The industry estimates for maintenance costs did not distinguish
between costs related to the annual report and costs related to
other operations. These estimates will be discussed after the
following section of annual reports.
Annual report. Insurance Code 964.060 requires each captive
insurance company to annually submit an annual statement on
its financial condition and a report of financial condition with an
independent certified public accountant's opinion of the com-
pany's financial condition. Insurance Code 964.056 requires
the commissioner to determine the capital and surplus that
the captive insurance company must maintain. Section 6.401PROPOSED RULES November 22, 2013 38 TexReg 8365
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Texas. Secretary of State. Texas Register, Volume 38, Number 47, Pages 8313-8478, November 22, 2013, periodical, November 22, 2013; Austin, Texas. (https://texashistory.unt.edu/ark:/67531/metapth379965/m1/53/: accessed July 17, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting UNT Libraries Government Documents Department.